Let's talk about open banking in North America

In this issue

Let's talk about how open banking is evolving in North America, focusing on its impact on customer experience and the market environment.

?? Recap on open banking?

In short, open banking is an emerging infrastructure that allows third-party financial service providers to access consumer banking, transactional, and other financial data through APIs. This approach aims to democratize financial services, giving consumers control over their financial information.?

On the business end?

Businesses can develop new models and revenue streams by collaborating with fintech companies through open banking. With access to a consumer’s comprehensive financial data, businesses can better develop personalized financial products and services. This streamlined data sharing also works to reduce operational inefficiencies and human prone errors, especially during the underwriting process.?

On the consumer end?

Open banking primarily aims to improve?customer experience by offering personalized services. With access to detailed financial data, providers can offer tailored products and services that meet an individual’s specific needs. This enables seamless integration, allowing customers to manage multiple accounts and financial products through a single platform and simplifying their financial management. ?

A critical part of open banking is ensuring robust data protection and emphasizing data ownership. Customers have greater control over their financial information, deciding who can access their data and for what purposes. ?

CFPB’s Rohit Chropra gets it right: “When consumers have a greater ability to share their information with new lenders, consumers can access credit at more competitive rates. We are already seeing this happen in mortgage lending.”

?? Industry insights?

Meaghan Johnson from Forbes highlights that open banking is a catalyst for innovation, significantly impacting various sectors from banks to climate tech companies. It expands data sharing from account aggregation to comprehensive digital identification and personal financial management.?

Open banking is increasingly seen as a cost-effective method for payments, growing rapidly in markets like the UK. Despite its benefits, challenges remain in ensuring widespread adoption and addressing data privacy concerns. The article highlights emerging use cases and discusses the need for incentives to encourage broader use among consumers and businesses: https://www.forbes.com/sites/meaghanjohnson/2024/05/08/open-banking-state-of-play-emerging-innovation-and-adoption-challenges/?sh=37aa5bd37f99 ?

Vass Bednar in The Globe & Mail advocates for structural separation between banks and retailers to ensure smart competition within Canada's banking system. Alex Lazarow from Forbes observes that emerging tools like Banking-as-a-Service platforms and open banking regulations are decreasing the value of centralized financial services and spurring fintech activity. Research and Markets projects substantial growth in the open banking sector, with a market value forecasted to reach $227.01 billion by 2033. Jonalynn Cueto from Wealth Professional reports that open banking measures in Canada's budget are expected to increase competition and consumer choice in the financial market: https://www.investmentexecutive.com/news/industry-news/second-bill-on-open-banking-expected-in-the-fall/ ?

? Solution spotlight?

ID Verify is designed to verify the age of your customers accurately and automate the onboarding process. It integrates data sources and prompts your customers to upload their ID and take a selfie, reducing the need for manual verification and minimizing potential errors. ?

ID Verify can mitigate the risk of non-compliance with precise and reliable age checks. This verifies a customer’s age and protects your revenue and reputation from fraudulent activities. Biometric facial recognition provides real-time verification, enabling immediate age confirmation for online services and transactions.?

?? Stay informed

Join us in our next edition as we further explore the impact of these changes and the ongoing efforts to democratize access to financial services. Further reading on transaction categorization and financial inclusion: https://inverite.ca/transaction-categorization-and-account-verification-for-lenders/?